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Definition of Fraud "Fraud" means an intentional deception or misrepresentation made by any person with the knowledge that the deception could result in some unauthorized benefit to that person or another person, including any act that constitutes fraud under applicable federal or State law. "Fraud" means an intentional deception or misrepresentation made by any person with the knowledge that the deception could result in some unauthorized benefit to that person or another person, including any act that constitutes fraud under applicable federal or State law. __________________________________ N.J.S.A. § 30:4D-55

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Definition of Waste Waste, typically not a criminal or intentional act, can be described as the over-utilization or misuse of services Waste, typically not a criminal or intentional act, can be described as the over-utilization or misuse of services

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Definition of Abuse "Abuse" means provider practices that are inconsistent with sound fiscal, business, or medical practices and result in unnecessary costs to Medicaid or in reimbursement for services that are not medically necessary or that fail to meet professionally recognized standards for health care. The term also includes recipient practices that result in unnecessary costs to Medicaid. "Abuse" means provider practices that are inconsistent with sound fiscal, business, or medical practices and result in unnecessary costs to Medicaid or in reimbursement for services that are not medically necessary or that fail to meet professionally recognized standards for health care. The term also includes recipient practices that result in unnecessary costs to Medicaid. __________________________________ N.J.S.A. § 30:4D-55

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New Jersey Medicaid Fraud Division The New Jersey "Medicaid Program Integrity and Protection Act" established the Office of the Medicaid Inspector General The New Jersey "Medicaid Program Integrity and Protection Act" established the Office of the Medicaid Inspector General On June 29, 2010 the Office of the Medicaid Inspector General was placed under the Office of the State Comptroller. On June 29, 2010 the Office of the Medicaid Inspector General was placed under the Office of the State Comptroller. OMIG renamed Medicaid Fraud Division OMIG renamed Medicaid Fraud Division

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New Jersey Medicaid Program Integrity and Protection Act The State of New Jersey expends more than $ 9 billion in taxpayer funds to fund the Medicaid program each year; The State of New Jersey expends more than $ 9 billion in taxpayer funds to fund the Medicaid program each year; Centralizes fraud recovery efforts and establishing an independent Office of the Medicaid Inspector General by statute to prevent, detect, and investigate fraud and abuse and coordinate the anti-fraud efforts of all State agencies funded by Medicaid Centralizes fraud recovery efforts and establishing an independent Office of the Medicaid Inspector General by statute to prevent, detect, and investigate fraud and abuse and coordinate the anti-fraud efforts of all State agencies funded by Medicaid For each fiscal year beginning after the fiscal year in which this act takes effect, the Governor shall recommend and the Legislature shall appropriate at least $ 3,000,000 from the General Fund to the Office of the Medicaid Inspector General to effectuate the purposes of this act. For each fiscal year beginning after the fiscal year in which this act takes effect, the Governor shall recommend and the Legislature shall appropriate at least $ 3,000,000 from the General Fund to the Office of the Medicaid Inspector General to effectuate the purposes of this act.

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New Jersey Medicaid Program Integrity and Protection Act - Powers To conduct and supervise all State government activities, except those of the Medicaid Fraud Control Unit in the Department of Law and Public Safety, relating to Medicaid integrity, fraud, and abuse; To conduct and supervise all State government activities, except those of the Medicaid Fraud Control Unit in the Department of Law and Public Safety, relating to Medicaid integrity, fraud, and abuse; To call upon any department, office, division, or agency of State government to provide such information, re- sources, or other assistance as the Medicaid Inspector General deems necessary to discharge the duties and functions To call upon any department, office, division, or agency of State government to provide such information, re- sources, or other assistance as the Medicaid Inspector General deems necessary to discharge the duties and functions To direct all public or private Medicaid service providers or recipients to cooperate with the office and provide such information or assistance as shall be reasonably required by the office. To direct all public or private Medicaid service providers or recipients to cooperate with the office and provide such information or assistance as shall be reasonably required by the office.

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New Jersey Medicaid Program Integrity and Protection Act - Powers (1) To establish, in consultation with the department and the Attorney General, guidelines under which the withholding of payments or exclusion from Medicaid may be imposed on a provider or shall automatically be imposed on a provider; (1) To establish, in consultation with the department and the Attorney General, guidelines under which the withholding of payments or exclusion from Medicaid may be imposed on a provider or shall automatically be imposed on a provider; (2) To review the utilization of Medicaid services to ensure that Medicaid funds, regardless of which agency administers the service, are appropriately spent to improve the health of Medicaid recipients; (2) To review the utilization of Medicaid services to ensure that Medicaid funds, regardless of which agency administers the service, are appropriately spent to improve the health of Medicaid recipients; (3) To review and audit contracts, cost reports, claims, bills, and all other expenditures of Medicaid funds to determine compliance with applicable laws, regulations, guidelines, and standards, and enhance program integrity; (3) To review and audit contracts, cost reports, claims, bills, and all other expenditures of Medicaid funds to determine compliance with applicable laws, regulations, guidelines, and standards, and enhance program integrity; (4) To consult with the department to optimize the Medicaid management information system in furtherance of the mission of the office. The department shall consult with the Medicaid Inspector General on matters that concern the operation, upgrade and implementation of the Medicaid management information system; (4) To consult with the department to optimize the Medicaid management information system in furtherance of the mission of the office. The department shall consult with the Medicaid Inspector General on matters that concern the operation, upgrade and implementation of the Medicaid management information system; (5) To coordinate the implementation of information technology relating to Medicaid integrity, fraud, and abuse; and (5) To coordinate the implementation of information technology relating to Medicaid integrity, fraud, and abuse; and (6) To conduct educational programs for Medicaid providers, vendors, contractors, and recipients designed to limit Medicaid fraud and abuse. (6) To conduct educational programs for Medicaid providers, vendors, contractors, and recipients designed to limit Medicaid fraud and abuse.

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MFD – What to Expect in 2011 Changes to the Audit Process Changes to the Audit Process MFD will review pharmacy and DME audits that will be performed by Molina Medicaid and other contractors MFD will review pharmacy and DME audits that will be performed by Molina Medicaid and other contractors Selection Criteria for Audits Selection Criteria for Audits Medicaid dollars billed on a yearly basis Medicaid dollars billed on a yearly basis provider type provider type Significant changes to Medicaid billings on a year to year basis Significant changes to Medicaid billings on a year to year basis Complaints from the public Complaints from the public Providers subject to corrective Action Plans Providers subject to corrective Action Plans Length of time since last audit/ investigation Length of time since last audit/ investigation Services billed Services billed

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MFD – What to Expect in 2011 Onsite Audits Onsite Audits A letter will be sent to the provider (scope, length, and authority for audit) A letter will be sent to the provider (scope, length, and authority for audit) Entrance conference - meeting with each individual provider Entrance conference - meeting with each individual provider Exit Conference – to discuss preliminary findings Exit Conference – to discuss preliminary findings Issuance of a Draft Audit Report Issuance of a Draft Audit Report 15 days to respond with objections and supporting documents 15 days to respond with objections and supporting documents If no response then report becomes final If no response then report becomes final

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MFD – What to Expect in 2011 Recovery and Exclusion Recovery and Exclusion Withholding of payments Withholding of payments Payment arrangements Payment arrangements Certificate of Debt Certificate of Debt Exclusion Exclusion Recovery Protocol Recovery Protocol Once a final audit report is submitted, a Notice of Claim will be issued Once a final audit report is submitted, a Notice of Claim will be issued Provider then has 20 days to request a pre-hearing conference to settle the matter Provider then has 20 days to request a pre-hearing conference to settle the matter If no agreement, then a Notice of Demand will be issued and the Provider has 20 days to request a hearing with the OAL If no agreement, then a Notice of Demand will be issued and the Provider has 20 days to request a hearing with the OAL

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Review of Exclusions Excluded providers may not treat, order, or bill for services rendered to Medicaid recipients. Excluded providers may not treat, order, or bill for services rendered to Medicaid recipients. May last from 3 – 8 years, or more May last from 3 – 8 years, or more If excluded provider is involved in the treatment, MFD will seek to recoup payment and may also seek damages and false claims penalties from the employer If excluded provider is involved in the treatment, MFD will seek to recoup payment and may also seek damages and false claims penalties from the employer

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Exclusion Lists According to § , plan sponsors “should review the HHS OIG and GSA 1 exclusion lists at least once a year, and have processes in place to prevent the payment of claims for services provided by excluded providers.” According to § , plan sponsors “should review the HHS OIG and GSA 1 exclusion lists at least once a year, and have processes in place to prevent the payment of claims for services provided by excluded providers.” List of Excluded Individuals and Entities (LEIE) List of Excluded Individuals and Entities (LEIE) Maintained by OIG Maintained by OIG Excluded Party List System (EPLS) Excluded Party List System (EPLS) Maintained by GSA Maintained by GSA __________________________________ 1 GSA: General Services Administration

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Exclusion Lists Sponsors should require that all new and existing employees disclose any “debarment, exclusion, or other event that makes them ineligible to perform work related directly or indirectly to Federal health care programs” 1 Sponsors should require that all new and existing employees disclose any “debarment, exclusion, or other event that makes them ineligible to perform work related directly or indirectly to Federal health care programs” 1 Sponsors must implement a policy to check exclusion lists before hiring Sponsors must implement a policy to check exclusion lists before hiring Sponsors should obtain certifications from pharmacies that they will review the exclusion lists upon hiring and annually thereafter and if an employee is found on such lists, he/she will be immediately removed from any work related directly or indirectly to all Federal health care programs and the pharmacy will take appropriate corrective actions Sponsors should obtain certifications from pharmacies that they will review the exclusion lists upon hiring and annually thereafter and if an employee is found on such lists, he/she will be immediately removed from any work related directly or indirectly to all Federal health care programs and the pharmacy will take appropriate corrective actions __________________________________ 1 See §

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What This Means for Pharmacies PIC and owner should check all its employees online at least once a year but monthly would be better PIC and owner should check all its employees online at least once a year but monthly would be better PIC and owner should have each new employee sign a document indicating he/she has not been and is not debarred. This should be recertified each year PIC and owner should have each new employee sign a document indicating he/she has not been and is not debarred. This should be recertified each year

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MFD – What to Expect in 2011 MFD Investigations MFD Investigations Staff of 20 investigators Staff of 20 investigators Includes law enforcement and healthcare professionals Includes law enforcement and healthcare professionals Common practices investigated Common practices investigated Billing for services not rendered Billing for services not rendered Providing medically unnecessary services Providing medically unnecessary services Submitting duplicate claims Submitting duplicate claims Upcoding Upcoding Buying back and re-dispensing medication Buying back and re-dispensing medication Drug Diversion Drug Diversion Will include interviews and analysis of claims data Will include interviews and analysis of claims data

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MFD – What to Expect in 2011 MFD will also review: MFD will also review: The relationship between the ordering physician and the pharmacy The relationship between the ordering physician and the pharmacy Whether the physician is licensed at the time of prescribing Whether the physician is licensed at the time of prescribing System Edits System Edits Organizations that use the services of excluded providers Organizations that use the services of excluded providers Providers with higher Medicaid claims than comparable pharmacies Providers with higher Medicaid claims than comparable pharmacies Whether there is evidence of a existing physicain- patient relationship Whether there is evidence of a existing physicain- patient relationship

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Examples of Edits Controls on early refills Controls on early refills Limits on the number of days before a refill is permitted Limits on the number of days before a refill is permitted Edits to prevent payment for statutorily excluded drugs Edits to prevent payment for statutorily excluded drugs Limits on the number of times a prescription can be refilled Limits on the number of times a prescription can be refilled Brand name versus generic Brand name versus generic Excessive claims for controlled substances Excessive claims for controlled substances Step therapy edits Step therapy edits

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Examples of Edits (cont.) Number of prior authorizations Number of prior authorizations Real time contraindication (e.g. drug-drug interactions) Real time contraindication (e.g. drug-drug interactions) Sex and age edits compared to the drug prescribed Sex and age edits compared to the drug prescribed Therapeutic edits Therapeutic edits Insufficient or excessive dosage edits Insufficient or excessive dosage edits Identifying drugs provided outside of the Part D benefit by Patient Assistance Programs Identifying drugs provided outside of the Part D benefit by Patient Assistance Programs

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What This Means for Pharmacies Follow-up with patients who repeatedly bring prescriptions in to fill too early Follow-up with patients who repeatedly bring prescriptions in to fill too early Do spot checks to confirm generic substitution is being carried out as per state law Do spot checks to confirm generic substitution is being carried out as per state law Do spot checks on CDS usage by patients to detected abuse patterns. Consider CDS class, addictive properties, street value, and geographic abuse patterns Do spot checks on CDS usage by patients to detected abuse patterns. Consider CDS class, addictive properties, street value, and geographic abuse patterns

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MFD – What to Expect in 2011 The new mantra: “Becoming a Medicaid provider is a privilege, not a right” The new mantra: “Becoming a Medicaid provider is a privilege, not a right” Increased scrutiny of Provider Applications Increased scrutiny of Provider Applications It is not a defense to say that the submission of a false application was unintentional. See Mi Farmacia v. DMAHS, HMA (April 20, 2008). It is not a defense to say that the submission of a false application was unintentional. See Mi Farmacia v. DMAHS, HMA (April 20, 2008). Failure to investigate and verfy information equivalent to a willful failure to provide truthful response. See Surgi-Med v. DMAHS, HMA (August 25, 2006). Failure to investigate and verfy information equivalent to a willful failure to provide truthful response. See Surgi-Med v. DMAHS, HMA (August 25, 2006). Questions on application increasingly complex Questions on application increasingly complex

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MFD – What to Expect in 2011 As of January 1, 2011, MFD will perform a pre-enrollment site visit for new applicants. As of January 1, 2011, MFD will perform a pre-enrollment site visit for new applicants. New Providers will be subject to enhanced oversight, such as prepayment review and payment caps. New Providers will be subject to enhanced oversight, such as prepayment review and payment caps.

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Screening of Providers Licensure check Licensure check Criminal background check Criminal background check Fingerprinting; Fingerprinting; Unscheduled and unannounced site visits, including pre-enrollment site visits Unscheduled and unannounced site visits, including pre-enrollment site visits Database checks (including such checks across States); and Database checks (including such checks across States); and Such other screening as the Secretary determines appropriate. Such other screening as the Secretary determines appropriate. PPACA (Pub. L ), Sec. 6401(a)(3)(B)

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Provisional Period of Enhanced Oversight The Secretary shall establish procedures to provide for a provisional period of not less than 30 days and not more than 1 year during which new providers of medical or other items or services and suppliers, as the Secretary determines appropriate, including categories of providers or suppliers, would be subject to enhanced oversight, such as prepayment review and payment caps The Secretary shall establish procedures to provide for a provisional period of not less than 30 days and not more than 1 year during which new providers of medical or other items or services and suppliers, as the Secretary determines appropriate, including categories of providers or suppliers, would be subject to enhanced oversight, such as prepayment review and payment caps Id.

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Increased Disclosure Requirements A provider of medical or other items or services or supplier who submits an application for enrollment or revalidation of enrollment in the program... shall disclose (in a form and manner and at such time as determined by the Secretary) any current or previous affiliation (directly or indirectly) with a provider of medical or other items or services or supplier that has uncollected debt, has been or is subject to a payment suspension under a Federal health care program (as defined in section 1128B(f)), has been excluded from participation under the program under this title, the Medicaid program under title XIX, or the CHIP program under title XXI, or has had its billing privileges denied or revoked. A provider of medical or other items or services or supplier who submits an application for enrollment or revalidation of enrollment in the program... shall disclose (in a form and manner and at such time as determined by the Secretary) any current or previous affiliation (directly or indirectly) with a provider of medical or other items or services or supplier that has uncollected debt, has been or is subject to a payment suspension under a Federal health care program (as defined in section 1128B(f)), has been excluded from participation under the program under this title, the Medicaid program under title XIX, or the CHIP program under title XXI, or has had its billing privileges denied or revoked. Id.

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Compliance Programs Regulations not yet written but PPACA requires Secretary to establish core elements. Regulations not yet written but PPACA requires Secretary to establish core elements. MFD: strongly encourages providers whose payments from the Medicaid program exceed $100,000 per year to implement a compliance program. MFD: strongly encourages providers whose payments from the Medicaid program exceed $100,000 per year to implement a compliance program.

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Compliance Programs Compliance programs need to encompass billings, payments, medical necessity, quality of care, governance, credentialing and other risk areas that a provider, with due diligence, identifies. Compliance programs need to encompass billings, payments, medical necessity, quality of care, governance, credentialing and other risk areas that a provider, with due diligence, identifies.

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Compliance Programs Specifically, any compliance plan should include the following elements: Specifically, any compliance plan should include the following elements: Designation of a chief compliance officer responsible for the day- to-day operation of the compliance program. Designation of a chief compliance officer responsible for the day- to-day operation of the compliance program. Training and education of all affected employees and persons Training and education of all affected employees and persons Training should occur periodically and should be made a part of the orientation of new employees A communication process for the reporting of compliance issues; Training should occur periodically and should be made a part of the orientation of new employees A communication process for the reporting of compliance issues; Disciplinary policies and standards that are distributed to all employees including policies Disciplinary policies and standards that are distributed to all employees including policies Failing to report suspected problems; Failing to report suspected problems; Engaging in non-compliant behavior; Engaging in non-compliant behavior; Encouraging, directing, facilitating or permitting either actively or passively non-compliant behavior. Encouraging, directing, facilitating or permitting either actively or passively non-compliant behavior. A system for routine identification of compliance risk areas including but not limited to internal audits and external audits, A system for routine identification of compliance risk areas including but not limited to internal audits and external audits,http://nj.gov/njomig/compliance/

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Processes a Pharmacy Should Have In Place Procedure to respond to data requests by CMS, MEDICs, and law enforcement, or their designees in a timely manner Procedure to respond to data requests by CMS, MEDICs, and law enforcement, or their designees in a timely manner Process to find overpayments and underpayments and properly report and repay Process to find overpayments and underpayments and properly report and repay Process to identify improper coverage determinations, services, or enrollment and properly report and repay Process to identify improper coverage determinations, services, or enrollment and properly report and repay __________________________________ 1 MEDICs: Medicare Drug Integrity Contractor – An organization that CMS has contracted with to perform specific program integrity functions for Part D under the Medicare Integrity Program. The MEDIC is CMS’ designee to manage CMS’s audit, oversight, and anti-fraud and abuse efforts in the Part D benefit.

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Processes a Pharmacy Should Have In Place (cont.) Process to identify claims submitted for drugs that were prescribed by excluded or deceased physicians and report and repay Process to identify claims submitted for drugs that were prescribed by excluded or deceased physicians and report and repay Policies that stress confidentiality, anonymity, and non-retaliation for compliance related questions or reports of potential non-compliance Policies that stress confidentiality, anonymity, and non-retaliation for compliance related questions or reports of potential non-compliance Procedures to correct underlying problems that produce Medicare Part D violations and prevent future misconduct. Procedures to correct underlying problems that produce Medicare Part D violations and prevent future misconduct.

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Processes a Pharmacy Should Have In Place (cont.) Procedures to keep records that document any and all corrective actions and follow-up compliance reviews for future health oversight purposes and/or referral to law enforcement, if necessary Procedures to keep records that document any and all corrective actions and follow-up compliance reviews for future health oversight purposes and/or referral to law enforcement, if necessary Process to comply with the ten-year record retention requirement 1 Process to comply with the ten-year record retention requirement 1 A commitment to Pharmacy & Therapeutic Committee decisions made by considering clinical efficacy and appropriateness of formulary drugs over cost A commitment to Pharmacy & Therapeutic Committee decisions made by considering clinical efficacy and appropriateness of formulary drugs over cost __________________________________ 1 See 42 C.F.R. § (d).

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A bay audit program in which the pharmacy’s dispensing area is divided into 4 separate sections and audit one section every week A bay audit program in which the pharmacy’s dispensing area is divided into 4 separate sections and audit one section every week Process to purge Will Call Bin of all prescriptions greater than 14 days old (Contact patient and remind them to pick up prescription, and if patient declines to pick up prescription, return it to stock and reverse the claim) Process to purge Will Call Bin of all prescriptions greater than 14 days old (Contact patient and remind them to pick up prescription, and if patient declines to pick up prescription, return it to stock and reverse the claim) Processes a Pharmacy Should Have In Place (cont.)

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What This Means for Pharmacies Keep a complete back up of all the pharmacy’s files off site on a daily or weekly basis Keep a complete back up of all the pharmacy’s files off site on a daily or weekly basis Review RAS promptly and correct all issues Review RAS promptly and correct all issues Repay promptly prescriptions not picked up by a patient or not authorized by a physician Repay promptly prescriptions not picked up by a patient or not authorized by a physician Report any issue regarding irregular prescriptions promptly Report any issue regarding irregular prescriptions promptly Create a policy assuring a 10 year record retention policy Create a policy assuring a 10 year record retention policy

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Internal Audits, Cont. Audits should also verify: Audits should also verify: That pharmacies are in compliance with minimum state pharmacy practice standards That pharmacies are in compliance with minimum state pharmacy practice standards That pharmacies post or distribute notices to patients to contact their plans if they want to question coverage information provided by pharmacists That pharmacies post or distribute notices to patients to contact their plans if they want to question coverage information provided by pharmacists Contracts with pharmacies and rebate and discount agreements Contracts with pharmacies and rebate and discount agreements Chief Compliance Officer should also conduct interviews with the pharmacy staff to gauge whether applicable Medicaid and Part D requirements are being followed Chief Compliance Officer should also conduct interviews with the pharmacy staff to gauge whether applicable Medicaid and Part D requirements are being followed

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What This Means for Pharmacies Do self monitoring audits on a regular basis so potential issues can be dealt with before a formal audit Do self monitoring audits on a regular basis so potential issues can be dealt with before a formal audit Do spot checks on inventories to make sure they match up with purchases Do spot checks on inventories to make sure they match up with purchases Do spot checks to verify proper NDC numbers are being used Do spot checks to verify proper NDC numbers are being used Do spot checks to verify prescriptions comply in all respects with Federal and State law Do spot checks to verify prescriptions comply in all respects with Federal and State law

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Medicare ZPIC Audits “CMS pays 4.8 million Medicare claims each day, approximately 1.2 billion Medicare claims each year. Nevertheless, with the new tools provided to CMS under the Affordable Care Act, we are steadily working to better incorporate fraud prevention activities into our claims payment and provider enrollment processes where appropriate... All of these new authorities and analytical tools will help move CMS away from its historical “pay and chase” mode towards a closer alignment with strong fraud deterrents and increased enrollment screenings, new disclosure and transparency guidelines, and early identification of high-risk providers and suppliers.” - Dr. Peter Budetti, JD, Deputy Administrator and Director, Center for Program Integrity, Testimony before Congress, September 22, “CMS pays 4.8 million Medicare claims each day, approximately 1.2 billion Medicare claims each year. Nevertheless, with the new tools provided to CMS under the Affordable Care Act, we are steadily working to better incorporate fraud prevention activities into our claims payment and provider enrollment processes where appropriate... All of these new authorities and analytical tools will help move CMS away from its historical “pay and chase” mode towards a closer alignment with strong fraud deterrents and increased enrollment screenings, new disclosure and transparency guidelines, and early identification of high-risk providers and suppliers.” - Dr. Peter Budetti, JD, Deputy Administrator and Director, Center for Program Integrity, Testimony before Congress, September 22, 2010.

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Medicare ZPIC Audits “Five ZPICs will concentrate on fraud ‘hot spots’ in FL, IL, TX, NY and CA where we know the program has the greatest vulnerabilities.” - Deborah Taylor, Acting Director and Chief Financial Officer, Testimony before Congress, April 22, “Five ZPICs will concentrate on fraud ‘hot spots’ in FL, IL, TX, NY and CA where we know the program has the greatest vulnerabilities.” - Deborah Taylor, Acting Director and Chief Financial Officer, Testimony before Congress, April 22, 2009.

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ZPIC Audits Continued The ZPIC contracts include all claim types: The ZPIC contracts include all claim types: Part A, Home Health, Hospice, Part B, Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS), Managed Care (Part C), Part D Medicare Prescription Drug, and Medicare and Medicaid Data Matching. Part A, Home Health, Hospice, Part B, Durable Medical Equipment, Prosthetics, Orthotics, and Supplies (DMEPOS), Managed Care (Part C), Part D Medicare Prescription Drug, and Medicare and Medicaid Data Matching. Target both the medical necessity of a claim and coding errors. Target both the medical necessity of a claim and coding errors. ZPICS look at billing trends and patterns, focusing on providers whose billings for Medicare services are higher than the majority of providers in the community. ZPICS look at billing trends and patterns, focusing on providers whose billings for Medicare services are higher than the majority of providers in the community.

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ZPIC Audits Continued Auditors can arrive unannounced, demand medical/ prescription records, and interview both providers and beneficiaries. Auditors can arrive unannounced, demand medical/ prescription records, and interview both providers and beneficiaries. Conduct pre-payment and post-payment reviews. Conduct pre-payment and post-payment reviews. They can be disruptive, time consuming and expensive. They can be disruptive, time consuming and expensive.

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ZPIC Audits Continued Extrapolation of damages utilized. See Sec of CMS’ Medicare Program Integrity Manual Extrapolation of damages utilized. See Sec of CMS’ Medicare Program Integrity Manual Chaves County Home Health Services v. Sullivan, 931 F.2d 914 (D.C. Cir. 1991), Chaves County Home Health Services v. Sullivan, 931 F.2d 914 (D.C. Cir. 1991), Before an auditor can employ extrapolation, there must be either a determination of a sustained or high level of payment error, or documentation that educational intervention has failed to correct the payment error. Sec 935 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 Before an auditor can employ extrapolation, there must be either a determination of a sustained or high level of payment error, or documentation that educational intervention has failed to correct the payment error. Sec 935 of the Medicare Prescription Drug, Improvement, and Modernization Act of 2003

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ZPIC Audits Continued Cases of potential fraud will be referred to the Office of Inspector General (OIG) for consideration and possible initiation of criminal or civil prosecution, civil monetary penalty, or administrative sanction actions. Cases of potential fraud will be referred to the Office of Inspector General (OIG) for consideration and possible initiation of criminal or civil prosecution, civil monetary penalty, or administrative sanction actions.

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Responding to a ZPIC Audit What can you do? What can you do? Internal review of requested claims. Internal review of requested claims. The value of internal analysis vs. risk of creating a non-privileged paper trail of identified problems. Review past claims audits The value of internal analysis vs. risk of creating a non-privileged paper trail of identified problems. Review past claims audits Review the reasons given for each denial. Review the reasons given for each denial. Has the contractor correctly cited Medicare policy? Has the contractor correctly cited Medicare policy? Appeals must be filed in a timely fashion. Appeals must be filed in a timely fashion.

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Responding to a ZPIC Audit If a provider is the target of ZPIC medical review, it should be assumed that it has been specifically targeted and the audit is not random This influences the manner in which a ZPIC request for records should be received and evaluated by the provider Review may include investigative techniques in addition to data analytics and claims review

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Responding to a ZPIC Audit Stamp Date and Time Received Train staff on identity of contractors Ensure that staff are aware of deadlines to submit records Ensure contractor is sending to the correct person/ address Send certified mail Keep originals of documents

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ZPIC Audits Continued The PSC or ZPIC BI [Benefit Integrity] unit or the contractor MR [Medical Review] unit shall identify the source of the random numbers used to select the individual sampling units. The PSC or ZPIC BI unit or the contractor MR unit shall also document the program and its algorithm or table that is used; this documentation becomes part of the record of the sampling and must be available for review.” (emphasis added) The PSC or ZPIC BI [Benefit Integrity] unit or the contractor MR [Medical Review] unit shall identify the source of the random numbers used to select the individual sampling units. The PSC or ZPIC BI unit or the contractor MR unit shall also document the program and its algorithm or table that is used; this documentation becomes part of the record of the sampling and must be available for review.” (emphasis added) “The PSC or ZPIC BI units or the contractor MR units shall document all steps taken in the random selection process exactly as done to ensure that the necessary information is available for anyone attempting to replicate the sample selection.” (emphasis added) “The PSC or ZPIC BI units or the contractor MR units shall document all steps taken in the random selection process exactly as done to ensure that the necessary information is available for anyone attempting to replicate the sample selection.” (emphasis added) Section of CMS’ Medicare Program Integrity Manual Section of CMS’ Medicare Program Integrity Manual

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Audits by Government Government Action Government Action Prepayment Monitoring/ Withholding of funds Prepayment Monitoring/ Withholding of funds 42 C.F.R and N.J.A.C. 10: (d) 42 C.F.R and N.J.A.C. 10: (d) Reliable evidence of fraud or willful misrepresentation by a provider Reliable evidence of fraud or willful misrepresentation by a provider Right to submit written evidence for consideration Right to submit written evidence for consideration Right to a hearing Right to a hearing

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Pharmacist Obligations in a Government Audit Allow access to facilities as requested Allow access to facilities as requested Failure to do so may result in corrective actions (including intermediate sanctioning in line with 42 C.F.R. Subpart O) Failure to do so may result in corrective actions (including intermediate sanctioning in line with 42 C.F.R. Subpart O) Allow access to records associated with Part D program for 10 years Allow access to records associated with Part D program for 10 years

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What This Means for Pharmacies Pharmacies have rights to appeal audit findings Pharmacies have rights to appeal audit findings Hearings, Fair Hearings, Due Process Hearings Hearings, Fair Hearings, Due Process Hearings Limited time to appeal Limited time to appeal Importance of Preserving Documents & Communications Importance of Preserving Documents & Communications Hearings can be in front of an Administrative Law Judge (ALJ) Hearings can be in front of an Administrative Law Judge (ALJ)

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What This Means for Pharmacies Possible Criminal Exposure Possible Criminal Exposure Healthcare Fraud and Medicaid Fraud are crimes potentially punishable by jail time Healthcare Fraud and Medicaid Fraud are crimes potentially punishable by jail time Each fraudulent claim can be a separate offense Each fraudulent claim can be a separate offense Civil fines and remuneration can accompany criminal charges Civil fines and remuneration can accompany criminal charges

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Sponsor Fraud, Waste and Abuse Examples Payments for excluded drugs Payments for excluded drugs Multiple billing Multiple billing Payments for Part D drugs that are not for a “medically acceptable indication” Payments for Part D drugs that are not for a “medically acceptable indication” Inappropriate formulary decisions Inappropriate formulary decisions False information given to CMS False information given to CMS Bait and switch pricing Bait and switch pricing Beneficiary is led to believe that a drug will cost one price, but at the point of sale is charged a higher price Beneficiary is led to believe that a drug will cost one price, but at the point of sale is charged a higher price Inducing beneficiaries to sign up for specific drugs on formulary that are later removed Inducing beneficiaries to sign up for specific drugs on formulary that are later removed

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Pharmacy Fraud, Waste and Abuse Examples 1 Inappropriate billing practices Inappropriate billing practices Incorrectly billing for secondary payers to receive increased reimbursement Incorrectly billing for secondary payers to receive increased reimbursement Billing for non-existent prescriptions Billing for non-existent prescriptions Billing multiple payers for the same prescriptions, except as required for coordination of benefit transactions Billing multiple payers for the same prescriptions, except as required for coordination of benefit transactions Billing for brand when generics are dispensed Billing for brand when generics are dispensed Billing for non-covered prescriptions as covered items Billing for non-covered prescriptions as covered items Billing for prescriptions that are never picked up (i.e., not reversing claims that are processed when prescriptions are filled by never picked up) Billing for prescriptions that are never picked up (i.e., not reversing claims that are processed when prescriptions are filled by never picked up) Billing based on “gang visits,” e.g., a pharmacist visits a nursing home and bills for numerous pharmaceutical prescriptions without furnishing any specific service to individual patients Billing based on “gang visits,” e.g., a pharmacist visits a nursing home and bills for numerous pharmaceutical prescriptions without furnishing any specific service to individual patients Inappropriate use of dispense as written (“DAW”) codes Inappropriate use of dispense as written (“DAW”) codes Prescription splitting to receive additional dispensing fees Prescription splitting to receive additional dispensing fees Drug diversion Drug diversion __________________________________ 1 See § of guidance

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Prescription drug shorting Prescription drug shorting Pharmacist provides less than the prescribed quantity and intentionally does not inform the patient or make arrangements to provide the balance but bills for the fully-prescribed amount Pharmacist provides less than the prescribed quantity and intentionally does not inform the patient or make arrangements to provide the balance but bills for the fully-prescribed amount If there is insufficient quantity of medication to completely fill the prescription, should the fill the prescription as “cash” and dispense a three day supply at no charge. When a sufficient quantity of the medication is received, reverse the “cash” prescription and re-bill at the full amount and supply the difference between prescription full quantity and the amount given If there is insufficient quantity of medication to completely fill the prescription, should the fill the prescription as “cash” and dispense a three day supply at no charge. When a sufficient quantity of the medication is received, reverse the “cash” prescription and re-bill at the full amount and supply the difference between prescription full quantity and the amount given Prescription refill errors Prescription refill errors A pharmacist provides the incorrect number of refills prescribed by the provider A pharmacist provides the incorrect number of refills prescribed by the provider Pharmacy Fraud, Waste and Abuse Examples (cont.) 1 __________________________________ 1 See § of guidance

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Prescription forging or altering Prescription forging or altering Existing prescriptions are altered, by an individual without the prescriber’s permission to increase quantity or number of refills Existing prescriptions are altered, by an individual without the prescriber’s permission to increase quantity or number of refills Dispensing expired or adulterated prescription drugs Dispensing expired or adulterated prescription drugs Pharmacies dispense drugs that are expired, or have not been stored or handled in accordance with manufacturer and FDA requirements Pharmacies dispense drugs that are expired, or have not been stored or handled in accordance with manufacturer and FDA requirements Bait and switch pricing Bait and switch pricing A beneficiary is led to believe that a drug will cost one price, but at the point of sale the beneficiary is charged a higher amount A beneficiary is led to believe that a drug will cost one price, but at the point of sale the beneficiary is charged a higher amount $4.00 Generic Program: Must make generic listing available for review and if a generic is no longer available for $4.00, it must be immediately removed from the list and patient must be informed of the change before dispensing $4.00 Generic Program: Must make generic listing available for review and if a generic is no longer available for $4.00, it must be immediately removed from the list and patient must be informed of the change before dispensing Pharmacy Fraud, Waste and Abuse Examples (cont.) 1 __________________________________ 1 See § of guidance

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Illegal remuneration schemes Illegal remuneration schemes Pharmacy is offered, or paid, or solicits unlawful remuneration to induce or reward the pharmacy to switch patients to different drugs, influence prescribers to prescribe different drugs, or steer patients to plans Pharmacy is offered, or paid, or solicits unlawful remuneration to induce or reward the pharmacy to switch patients to different drugs, influence prescribers to prescribe different drugs, or steer patients to plans TrOOP 2 manipulation TrOOP 2 manipulation When a pharmacy manipulates TrOOP to either push a beneficiary through the coverage gap, so the beneficiary can reach catastrophic coverage before they are eligible, or manipulates TrOOP to keep a beneficiary in the coverage gap so that catastrophic coverage is never realized When a pharmacy manipulates TrOOP to either push a beneficiary through the coverage gap, so the beneficiary can reach catastrophic coverage before they are eligible, or manipulates TrOOP to keep a beneficiary in the coverage gap so that catastrophic coverage is never realized Failure to offer negotiated prices Failure to offer negotiated prices A pharmacy does not offer a beneficiary the negotiated price of a Part D drug A pharmacy does not offer a beneficiary the negotiated price of a Part D drug Pharmacy Fraud, Waste and Abuse Examples (cont.) 1 __________________________________ 1 See § of guidance 2 TrOOP: True Out of Pocket Costs: The amount a beneficiary must spend on Part D covered drugs to reach catastrophic coverage

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Prescriber Fraud, Waste and Abuse Examples 1 Illegal remuneration schemes Illegal remuneration schemes Prescriber is offered, or paid, or solicits, or receives unlawful remuneration to induce or reward the prescriber to write prescriptions for drugs or products Prescriber is offered, or paid, or solicits, or receives unlawful remuneration to induce or reward the prescriber to write prescriptions for drugs or products Prescription drug switching Prescription drug switching Offers of cash payments or other benefits to a prescriber to induce the prescriber to prescribe certain medications rather than others Offers of cash payments or other benefits to a prescriber to induce the prescriber to prescribe certain medications rather than others Script mills Script mills Provider writes prescriptions for drugs that are not medically necessary, often in mass quantities, and often for patients that are not theirs. These scripts are usually written, but not always, for controlled drugs for sale on the black market, and might include improper payments to the provider Provider writes prescriptions for drugs that are not medically necessary, often in mass quantities, and often for patients that are not theirs. These scripts are usually written, but not always, for controlled drugs for sale on the black market, and might include improper payments to the provider __________________________________ 1 See § of guidance

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Prescriber Fraud, Waste and Abuse Examples 1 Provision of false information Provision of false information Prescriber falsifies information (not consistent with medical record) submitted through a prior authorization or other formulary oversight mechanism in order to justify coverage. Prescriber misrepresents the dates, descriptions of prescriptions or other services furnished, or the identity of the individual who furnished the services Prescriber falsifies information (not consistent with medical record) submitted through a prior authorization or other formulary oversight mechanism in order to justify coverage. Prescriber misrepresents the dates, descriptions of prescriptions or other services furnished, or the identity of the individual who furnished the services Theft of prescriber’s DEA number or prescription pad Theft of prescriber’s DEA number or prescription pad This information could illegally be used to write prescriptions for controlled substances or other medications often sold on the black market. In the context of e-prescribing, includes the theft of the provider’s authentication (log in) information This information could illegally be used to write prescriptions for controlled substances or other medications often sold on the black market. In the context of e-prescribing, includes the theft of the provider’s authentication (log in) information __________________________________ 1 See § of guidance

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Medicare Beneficiary Fraud, Waste and Abuse Examples 1 Misrepresentation of status Misrepresentation of status A Medicare beneficiary misrepresents personal information, such as identity, eligibility, or medical condition in order to illegally receive the drug benefit. Enrollees who are no longer covered under a drug benefit plan may still attempt to use their identity card to obtain prescriptions. A Medicare beneficiary misrepresents personal information, such as identity, eligibility, or medical condition in order to illegally receive the drug benefit. Enrollees who are no longer covered under a drug benefit plan may still attempt to use their identity card to obtain prescriptions. Identity theft Identity theft Perpetrator uses another person’s Medicare card to obtain prescriptions. Perpetrator uses another person’s Medicare card to obtain prescriptions. TrOOP manipulation TrOOP manipulation A beneficiary manipulates TrOOP to push through the coverage gap, so the beneficiary can reach catastrophic coverage before they are eligible. A beneficiary manipulates TrOOP to push through the coverage gap, so the beneficiary can reach catastrophic coverage before they are eligible. Prescription forging or altering Prescription forging or altering Where prescriptions are altered, by someone other than the prescriber or pharmacist with prescriber approval, to increase quantity or number of refills. Where prescriptions are altered, by someone other than the prescriber or pharmacist with prescriber approval, to increase quantity or number of refills. __________________________________ 1 See § of guidance

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Prescription diversion and inappropriate use Prescription diversion and inappropriate use Beneficiaries obtain prescription drugs from a provider, possibly for a condition from which they do not suffer, and gives or sells this medication to someone else. Also can include the inappropriate consumption or distribution of a beneficiary’s medications by a caregiver or anyone else. Beneficiaries obtain prescription drugs from a provider, possibly for a condition from which they do not suffer, and gives or sells this medication to someone else. Also can include the inappropriate consumption or distribution of a beneficiary’s medications by a caregiver or anyone else. Resale of drugs on black market Resale of drugs on black market Beneficiary falsely reports loss or theft of drugs or feign illness to obtain drugs for resale on the black market. Beneficiary falsely reports loss or theft of drugs or feign illness to obtain drugs for resale on the black market. Prescription stockpiling Prescription stockpiling Beneficiary attempts to “game” their drug coverage by obtaining and storing large quantities of drugs to avoid out-of-pocket costs, to protect against periods of non-coverage (i.e., by purchasing a large amount of prescription drugs and then disenrolling), or for purposes of resale on the black market. Beneficiary attempts to “game” their drug coverage by obtaining and storing large quantities of drugs to avoid out-of-pocket costs, to protect against periods of non-coverage (i.e., by purchasing a large amount of prescription drugs and then disenrolling), or for purposes of resale on the black market. Doctor shopping Doctor shopping Beneficiary or other individual consults a number of doctors for the purpose of inappropriately obtaining multiple prescriptions for narcotic painkillers or other drugs. Doctor shopping might be indicative of an underlying scheme, such as stockpiling or resale on the black market. Beneficiary or other individual consults a number of doctors for the purpose of inappropriately obtaining multiple prescriptions for narcotic painkillers or other drugs. Doctor shopping might be indicative of an underlying scheme, such as stockpiling or resale on the black market. Medicare Beneficiary Fraud, Waste and Abuse Examples1 __________________________________ 1 See § of guidance

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CMS Position on Self-Reporting “While self reporting of potential fraud is voluntary 1, CMS believes that self- reporting of fraud, waste and abuse is a critical element to an effective program to control fraud, waste and abuse.” 2 __________________________________ 1 42 C.F.R. § (b)(4)(vi)(H) 2 See § 20 of guidelines